Each communications channel implies a different mode of recruiting and a different cost per hire. Imagine a spectrum that ranges from active at one end to passive at the other.

Each communications channel implies a different mode of recruiting and a different cost per hire. One way of thinking about the difference is to imagine a spectrum that ranges from active at one end to passive at the other. If job boards are the ultimate active hiring mechanism, cold calling (or retained executive search) is the extreme passive alternative.

Active candidates are less expensive to acquire, less expensive to hire and somewhat more likely to be committed to the job. Passive candidates tend to be more specialized, higher priced and more mercenary (lower commitment). Active candidates are exactly what you want in the 80% of slots that generate 20% of value. Passive candidates can (sometimes) be the best option in the other 20%

In a soon to emerge future, the appraisal of Cost Per Hire is going to include all of the actual costs of hiring. This will include an investment return analysis that covers time to productivity, lifetime growth and development, tenure, time to peak performance and more. Meanwhile, it’s good enough to understand that the ROI on a specific hire is directly tied to the source of hire and type of recruiting technique.

This future becomes possible because the next generation of HR software is going to be a comprehensive toolkit (from payroll and scheduling to talent management) all on one code stack. The one code stack thing is critical because any other data integration scheme falls apart in execution. It will be increasingly simple to evaluate the life cycle cost of hiring because all of the data will be in the same format.

Between here and there, we are going to have to figure things out another way.

One thing is very clear. Only the largest brands will be able to recruit in all of the available channels. (And, even they will be collecting effectiveness data in order to optimize their efforts.)

The most important question today is ‘which technologies should we ignore?’ We’re going to make this judgment call while allowing for the possibility (probability?) that our decision is only temporary. As social media (and other recruitment advertising channels) explode in complexity, we may not even know which technologies we’ve abandoned.

The best way to manage the effectiveness of the Recruiting Department’s spend is to clearly understand the cost implications of each channel. This work (which might be the kernel around which sourcing management is built) involves a 21st Century blend of data and intuition. The data comes from wherever you can get it. Intuition is used where necessary with a promise to replace it with data when the data becomes available.

For an extreme (and simple) example, let’s compare using the LinkedIn Database with using an ad on CareerBuilder.

The LinkedIn process requires a seat on the tool and whatever training is required to become effective at searching the data. Then, a combination of cold calls and or cold Email fleshes out the candidates who might be interested. Then the persuasion begins in earnest. Recruiters who use this approach have to be really good at proactively selling while screening. These sorts of recruiters are more expensive.

With CareerBuilder, you create the ad, submit it and then screen the results. The applicants are all interested, the recruiter simply has to evaluate qualifications on the way to a short list. These sorts of recruiters are less expensive.

In this simple example, it’s clear that LinkedIn delivers a more expensive process that results in a different kind of candidate recruited by a different kind of recruiter. It’s probably a great way to do some things.

The CareerBuilder approach, on the other hand, is simpler and uses less expensive recruiters. It’s a very useful approach for bulk staffing, service industry and entry level jobs.

A more detailed analysis would look at the complexities of each channel. In Facebook, for example, the cost of eyeballs and getting targeting right are the big expenses.

John Sumser

John Sumser is the founder, principal author and editor-in-chief of the HRExaminer Online Magazine. John explores the people, technology, ideas and careers of senior leaders in Human Resources and Human Capital.
John is the also principal of Two Color Hat where he routinely advises Human Resources, Recruiting Departments and Talent Management teams with product analysis, market segmentation, positioning, strategy and branding guidance.

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